Britannia in merger talks with CFS

The second largest building society, Britannia Building Society, has confirmed it is in exploratory talks with Co-operative Financial Services in a move that would require a change in legislation.

The Butterfill Bill would will make it easier for different types of mutuals – building societies, co-operatives and friendly societies – to work together,

The legislation, named after its sponsor Tory MP Sir John Butterfill, should be in place by the end of this year.

The member-owned organisations have similar values and share a mutual ethos, so there would be a strong cultural fit and it would represent a merger of strong equals according to the pair.

Britannia has an extensive branch network and a strong savings and mortgage franchise, while CFS, part of the Co-operative Group, has a strong personal and business banking franchise and life and general insurance expertise.

Britannia said the combined and complementary strengths of the two businesses could offer customers an ethical, customer-owned alternative to the publicly listed market, with the combined organisations having potentially around £70bn in assets and six million customers.

Britannia said the talks were at a very early stage. Neville Richardson, group chief executive, said: "Both businesses have been pursuing successful strategies and don't need to merge, but we recognise we could be even more successful by coming together and creating the UK's most trusted financial services business. Talks are at an early stage and no decisions have been taken, so it's too soon to talk about what changes might arise for our customers and employees. We can say that we remain committed to our Leek, Staffordshire base, our extensive branch network and our strong Britannia brand."

A CFS spokesman said: "We are speaking with Britannia and indeed other parties on a range of possibilities which could include our products being sold for example in their branch networks. Coming together under a merger is one possibility but at this present time legislation is not in place to enable this to happen between a building society and a co-operative and the market environment presently is also too volatile, even though we are coming at this from a clear position of strength."

Meanwhile, Robert Sharpe has been appointed the new chief executive of West Bromwich Building Society last week, it is believed as a precursor to a merger. He was the chief executive of the Portman Building Society when it merged with Nationwide. Nationwide, the largest building society in the UK, has swallowed the Cheshire and Derbyshire.